Areas of concern identified.
Finance minister addresses parliamentary consultative committee of finance ministry.
Government would make all efforts to meet the aspirations and expectations of the taxpayers and the corporate sector before finalisation of the Direct Tax Code. The next steps in this direction would be taken only after a comprehensive review of the draft Direct Tax Code by taking on board the suggestions received. This was stated by the Finance Minister, Shri Pranab Mukherjee while addressing the first newly constituted Parliamentary Consultative Committee attached to his ministry here yesterday. He said we are trying to bring the new taxation regime, which can last for another 50 years. Therefore, our endeavor is to see that new taxation system should include the basic features and time tested procedures of existing act, which have survived judicial security over the years, he added.
Shri Mukherjee said that he has started discussions within the Central Board of Direct Taxes on the suggestions received so far. The outcome of the discussion would be used for modifying the proposals contained in the draft Direct Tax Code.
The Finance Minister said while the initial reaction has been very encouraging, more detailed examination and interaction with stakeholders is throwing up some areas of concern. On the basis of interactions with the stakeholders, Government has identified nine critical areas for further detailed examination. These relate to (i) The concept of Minimum Alternative Tax (MAT) based on gross assets; (ii) Capital Gains Taxation in the case of non-residents; (iii) The Income Tax Act and the Double Taxation Avoidance Agreement (DTAA); (iv) General Anti-Avoidance Rule (GAAR); (v) Issues relating to effective management control and taxation of foreign companies in India; (vi) Taxation of charitable organizations; (vii) Shift from EEE to EET taxation system; (viii)Taxation of income from house property in case of Self-Occupied Property (SOP) by the individual; and (ix) Taxation in case of salaried class employees.
Shri. Mukherjee informed the meeting that the draft Tax Code has following new features:
(i) The rate of slabs for personal income tax in the case of individuals are as under:
|Rs. 1.6 lakh to Rs. 10 lakh||
|Rs. 10 lakh to Rs. 25 lakh||
|More than Rs. 25 lakh||
This proposed slab rates for personal Income Tax would put more money in the hands of consumers;
(ii) The rate for Corporate tax for companies is 25%;
(iii) Proposal for advance pricing agreement in respect of arm’s length in relation to an international transaction. The Advance Pricing Agreement (APA) will provide certainty in cross border transactions with taxpayer and it will facilitate in investments in India. Industry has been demanding for introduction of APA inIndia for quite some time. This proposal is in line with the best global practices adopted by many countries across the globe.
(iv) Rationalization of deductions and exemptions for streamlining the administrative processes and also to reduce the rent seeking behavior and
(v) Proposal for General Anti Avoidance Rules (GAAR) to check the treaty misuse by the third party residents.
Shri. Mukherjee said that it has been our endeavour to incorporate the best practices prevailing across the globe and to use innovative methods for attaining equity—vertical and horizontal, ensure growth with sustainability, create stable fiscal eco-system and have well regulated free markets in the Draft Tax Code. We want to present the stakeholders with a tax regime which is simple and broad based leading to lowering of tax rates, better tax compliance, reduced litigation certainty and stability in taxation system, added the Finance Minister.